Bottom line: USDJPY long term structure remains bearish against 112.22 resistance. Over the short term, bears might remain inclined to push beyond 106.00 interim support as long as prices stay below 109.85 levels.
Fundamental Outlook:
SPX500 managed to rally by +0.50% yesterday, closing around 3275 mark; supported by Q2 earnings. Believe it or not, the recent rally across Global Indices remains in complete divergence to reality. The indice might be taking its cues and trigger volatility, as US Congress debate over the new fiscal stimulus package.
COVID-19 infections still remain a major concern across US and Asian countries. US-China relations further deteriorated after US announced closure of Houston’s consulate yesterday. A Global Economic recession still looms large over COVID-19 pandemic effects. These facts might flip investor sentiment which is looking too optimistic at the moment.
NZDUSD is up over +0.50% as we prepare to publish today’s article, and is trading 0.6685 levels. The risk associated currency has been one the biggest beneficiaries since the exchange rate has risen from 0.5470 through 0.6685 levels. Traders might remain cautious around 0.6700 levels though.
Technical Analysis:
USDJPY might be looking to push through 108.40 levels in the short term, since it is the fibonacci 0.618 retracement of the recent drop between 109.85 and 106.00 respectively. Bears would remain poised to resume lower thereafter.
USDJPY seems to be consolidating since 112.22 highs earlier. The consolidation is taking shape of a decreasing resistance (111.75, 109.85) and constant support (106.00) kind of wedge, which might be looking to break lower, going forward.
Most traders might be preparing to sell around 108.40 if USDJPY manages to reach there, with a protective stop above 110.00, and projected targets below 105.00 respectively. Only a break above 109.85 would change the short term structure.
Prepared by
Harsh Japee, Technical Analyst.
USDJPY Chart
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